The Chinese Government has issued its 15th Five Year Plan, which aims to transform the country to an “innovation-led high-quality development” economy. At the centre of the new strategy is a shift from building out modern industrial capacity, which characterised the 14th Five Year Plan, to deepening industrial transformation through Industrial IoT, AI, intelligent automation, smart logistics, and continuing digitisation throughout manufacturing and agriculture.

A central theme of the 15th FYP is achieving China’s shift from an investment-led model to an innovation-led, “high-quality development” strategy, heavily reliant on cultivating “new quality productive forces” (NQPFs).

National technological self-reliance

The plan prioritises technological self-reliance in areas like AI, quantum computing, semiconductors, and clean energy, alongside the modernisation and digitisation of traditional industries.

It envisages the modernisation of Chinese industry through adoption of Industrial IoT, automation and AI. The CPC wishes to accelerate and deepen innovation and adoption in these areas to achieve strategic independence from both political and economic dependencies.

To highlight and drive adoption of the industrial strategy, the country is adopting a Lighthouse Factory approach, where advanced use case implementations are selected, prioritised and then highlighted nationally.

The Plan was issued after a Plenary Session of the Communist Party of China (CPC) Central Committee in October.

China has managed its economic and industrial development through a succession of five year plans (FYP) since the establishment of the People’s Republic of China in the late 1940s.

China 2035

China’s overall economic direction is set by the country’s “China 2035” strategy, a 15 year programme of industrial modernisation. Three five year plans, the current 14th, the just-published 15th and its follow-on, the 16th, are all earmarked for achieving the country’s goals set out in the China 2035 strategy.

The goal of the China 2035 strategy is to achieve per capita GDP on a par with a mid-level developed country. The 15th FYP is seen as the critical FYP in the achievement of this goal.

National Security Imperative

The 15th FYP is being given the status of a national security imperative, tied to China’s wider strategic goals. China wants to achieve economic and industrial independence from outside economic powers, most particularly Taiwan and the United States. To a lesser extent, the country is also seeking industrial independence from countries such as Japan, Korea, and European countries, particularly The Netherlands. Impetuses for this change include not only its own agenda over Taiwan and the hostility of the Trump Administration, but also a perceived failure of its Belt and Road strategy, debt crises affecting many of its Belt and Road partners, and the property debt crisis within China.

The shift to perceiving an FYP as a national security imperative is changing the way that the plan will be implemented. The freedom of manoeuvre of regional governors and administrations since Deng Xiaoping over implementation of an FYP is being sharply curtailed, and the power of the central government in Beijing is being strongly asserted. The 15th FYP is envisaging a level of centralised planning and control not seen since the days of Chairman Mao.

Dual Track Approach

Under the 15th FYP, industrial development will follow a dual track. Traditional industries like chemicals, machinery, and shipbuilding will be optimised and upgraded. This involves promotion of technological transformation, digitalisation, automation, and green practices.

In the second track, China will accelerate strategic emerging industry clusters such as new energy, new materials, aerospace, and the low-altitude economy. Future industries, including quantum technology, biomanufacturing, hydrogen and fusion energy, brain-computer interfaces, embodied intelligence, and 6G communications, will also be fostered.

To achieve “scientific modernisation”, China aims to strengthen innovation and core technology breakthroughs in key fields. These include: integrated circuits; industrial machinery; and high-end instruments. In informatics, China aims to further boost the Digital China initiative, with an “open, shared, and secure” national integrated data market.

A New National System

The CPC Central Authority will play a central role in directing and securing the plan. The Party Central Committee with Xi Jinping at its head is “calling upon the entire Party and nation to rally closely to fulfil the 15th FYP”. In reality, this puts the whole authority of the CPC, and of Xi himself, behind not only the Plan, but also every aspect of its implementation. It leaves no room for local modification or pace.

Implementation will rely on a “new national system”. This will create more centralised control over capital allocation for industry and regions. The government intends to act as a systems integrator and venture capitalist to mobilise resources, while markets provide for commercialisation.

Modernisation through Digital Technologies

The application of Industrial IoT (IIoT), automation, and AI forms the digital backbone of industrial transformation within the 15th FYP. The Industrial Internet of Things is seen as the central nervous system for the modernised industrial system. NQPFs will help reorganise and optimise traditional production using advanced technologies such as IT, AI, big data, and the IoT.

Allied to Industrial IoT, the “AI Plus” initiative aims to promote a deep integration of artificial intelligence across all industries, services, and society. Highlighting success and driving industrial modernisation will be Lighthouse Factories, representing a pinnacle of intelligent manufacturing, utilising IIoT, advanced robotics, AI-powered solutions, and digital twins to drive efficiency and high-quality production.